Why is gold going down so much?

13 posts / 0 new
Last post
dillonlisa1's picture
dillonlisa1
Status: Member (Offline)
Joined: Aug 12 2009
Posts: 13
Why is gold going down so much?

Does any one know? 

mryuri's picture
mryuri
Status: Bronze Member (Offline)
Joined: May 12 2011
Posts: 25
Gold going down

 Take a look at the 5 or even 10 year graph of gold and it should alay your concerns. Gold was due for a correction. It got too far above it's moving average. If it went higher it may have crashed and burned. As it is, this correction should be welcomed by long time investors. Yes its annoying not knowing when exactly to get out and back in, so just stay in and don't look at the graph if it stresses you out too much. I think  we have now, more or less, corrected . I just bought some more. To me silver also looks a great buy at the moment. With negative real interest rates, this bull has a few more years in it. 

dillonlisa1's picture
dillonlisa1
Status: Member (Offline)
Joined: Aug 12 2009
Posts: 13
May be I should go get some

May be I should go get some silver.

What do you mean whey you say it could have 'crashed & burned'?

txgirl69's picture
txgirl69
Status: Bronze Member (Offline)
Joined: Apr 20 2009
Posts: 96
I'm no financial guru, but....

I was reading yesterday (on Zero Hedge, I believe) that gold came down because China hiked gold margins 27%. - I have no idea what that means, I just saw it in print, on a couple of different sites...... The people writing this were saying it wasn't because of the news on durables, or because someone was dumping their investment, gold came down due to the "margin hikes" of CME.

For the record, we did buy some yesterday, just in case Friday's Fed announcement causes gold to soar to new heights....

 

 

Johnny Oxygen's picture
Johnny Oxygen
Status: Diamond Member (Offline)
Joined: Sep 9 2009
Posts: 1443
Re: Why is gold going down so much?

Gold tumbles as CME raises margin calls for second time

http://www.telegraph.co.uk/finance/personalfinance/investing/gold/872242...

Gold fell sharply again on Thursday as investors reacted to the Chicago Mercantile Exchange's decision to raise margins requirements on gold futures contracts for the second time in a month.

"The last 24 hours there was definitely profit-taking. With the margin hike, if speculators don't have the money to pull out as extra margin they'll just cut their positions. That contributed to the liquidation."

Margin calls are one way to knock the price of a commodity down.

Gold is the canary in the coal mine. It says that the trust in the dollar is eroding. Whenever gold moves higher at a rapid rate then the price is artificially knocked down to stave off the momentum. But as you can see it always comes back and reaches new highs. Consider it a gift and a chance to accumulate more.

Gold was due for a correction. It got too far above it's moving average. If it went higher it may have crashed and burned.

No. That is inaccurate. Gold has been kicking the dollars ass since 2003. It will not crash and burn. The market as a whole is terrified of gold actions. Yes it will fluctuate wildly but will always trend up for the foreseeable future.

 

 

patrickhenry's picture
patrickhenry
Status: Bronze Member (Offline)
Joined: Mar 12 2009
Posts: 76
txgirl69 wrote: I was
txgirl69 wrote:

I was reading yesterday (on Zero Hedge, I believe) that gold came down because China hiked gold margins 27%. -

 

 

ZH also noted gold's huge drop brought it to price levels of LAST WEEK.

 

mryuri's picture
mryuri
Status: Bronze Member (Offline)
Joined: May 12 2011
Posts: 25
"crashed and burned"

 Perhaps "crashed and burned"  was over stating it. What I meant was, if it went parabolic it would have had a blow off top and dropped by anything up to 30-40% before starting the long march up again. We are fortunate it did not go parabolic.

Markets now heading down while PMs are getting back into the groove. 

mryuri's picture
mryuri
Status: Bronze Member (Offline)
Joined: May 12 2011
Posts: 25
gold correction

However, I do insist it was due for a correction. As did most of the banks (UBS) and big investors that were anticipating a $150 correction, so they sold. There were no surprises here. They are all going to start pilling back in now. 

Silver, I do not think was due for a correction, as it had been lagging a bit recently, yet it got dragged down by gold, which makes me think silver is going to outperform gold in the short term. 

Any thoughts on this?

mryuri's picture
mryuri
Status: Bronze Member (Offline)
Joined: May 12 2011
Posts: 25
Gold correction was due?

 http://www.mineweb.com/mineweb/view/mineweb/en/page504?oid=134196&sn=Detail&pid=33

mryuri's picture
mryuri
Status: Bronze Member (Offline)
Joined: May 12 2011
Posts: 25
Gold correction was due?

 http://www.mineweb.com/mineweb/view/mineweb/en/page504?oid=134196&sn=Detail&pid=33

tictac1's picture
tictac1
Status: Silver Member (Offline)
Joined: Sep 25 2009
Posts: 175
Good to hear from a founding

Good to hear from a founding father...:)

Yes, gold's "massive drop" did not even bring it back down to where it started with the whole post-QE2 flop 'n' twitch in the markets.  Look at the long charts, you'll see a drop back to about $1600 in the next few days would not be outside the pattern.  The recent upward spike was fear-induced.  Look for propaganda pumping the public's confidence in government to know when to buy...:)

The fundamentals have not changed, that's what is important.  As long as debt capitalism drives the world economy, gold will (in the long view) continue to rise.

 

Poet's picture
Poet
Status: Diamond Member (Offline)
Joined: Jan 21 2009
Posts: 1892
Expect Margin Hike Volatility

The whole thing with margin rate hikes spice up the speculation in gold and silver markets.

Traders can put down some money, and use that to control contracts. That amount they put down is a small percentage of the overall value of a contract - thus they can profit more when selling a contract after prices rise.

Margin rate hikes were last announced yesterday, to be effective at end of business today. Traders can still put up less than $10,000 to control each 100 troy ounce contract for gold futures. As you can see, there is plenty of room to raise margins up to 20% or even 50% - or lower them if prices drop too low. It's like the Fed setting interest rates. :P

Whenever prices start going parabolic, margin hikes can be issued by the trading authorities. It was done with silver back in April. (Remember the run up to $50 before it dropped back to the low $30s?)

Whenever someone (or your fear of being left out of the surge) tells you to buy going into a gold or silver run-up, keep in mind that it's very VERY easy for the trading authorities to hike margin rates even a little and require traders to put money on the table to cover the contracts they control. Whenever that happens, prices drop precipitously as those without the covering money maybe forced to sell their contracts - often at a loss.

So while long-term, gold and silver may be good investments, be aware that you will see big run-ups and big drops. Those with trading connections may get advance warning about margin hikes, and make a killing. Those without connections may want to consider buying on major pull-backs only.

Poet

dillonlisa1's picture
dillonlisa1
Status: Member (Offline)
Joined: Aug 12 2009
Posts: 13
Thank you

Hey Poet, thanks for your explaination that has helped me a lot.

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
Login or Register to post comments